"You've got the lowest home ownership rates now in 66 years, Auckland has some of the most expensive housing in the world relative to incomes and for two winters in a row there has been a massive surge in homelessness with thousands of people living in cars and garages," Mr Twyford said.

The share of state houses dropped from an estimated 4 percent to 3.4 percent of the national housing stock between 2008 and 2017.

Mrs Collins denied National was ideologically averse to the state providing housing, but it "was an acceptance that we weren't going to improve the situation for people if we didn't look to other options".

"Certainly when you've got social or community providers saying, 'Look, we could do a better job than Housing NZ in some of these situations.' Well, why wouldn't we look at them?" Mrs Collins said.

While government spending on maintenance increased to $314m last year, it received $305m in dividends from HNZ.

Salvation Army social policy analyst Alan Johnston said Housing NZ tried hard to boost housing in high demand areas like Auckland, but National never gave it enough money to do its job.

"They asked Housing NZ to do an impossible task of radically restructuring its balance sheet, reconfiguring its stock and returning dividends while at the same time maintaining the number of houses that they provided.

"And it simply didn't work."

Photo: RNZ / Richard Tindiller

The new government will put in $2b in its KiwiBuild programme to build 100,000 affordable houses over the next decade. Affordable was defined as less than $650,000 for a home in Auckland.

"Not only did they fail to build more housing but in Auckland, last year, they only built 8600 new homes. The city needed 14,000 just to stand still."

"And on top of that, the market hasn't been producing many affordable homes. Only 5 percent of new builds are affordable. That's nuts," Mr Twyford said.

KiwiBuild was aiming for 1000, 5000 and 10,000 new homes over the next three years respectively. It was unsure whether Mr Twyford's goal is achievable.

The building industry was already flat tack, and crying out for more workers and raw materials.

Certified Builders Association chief executive Grant Florence said the high cost of land undermined the government's drive to build cheap houses.

"There needs to be some direction or commitment from central government around what they will do to bring that cost down, or provide some subsidy to that, or whatever."

However, Mr Twyford said $650,000 for a house in Auckland was indeed still too much for many people. He was talking with banks about a shared equity model, where a bank would take a stake in a house to lower the initial cost.

More state houses that the government had promised was also critical, Mr Johnson said.

"There's an absolute urgency to build state houses, because of the problems we are having around people in poor housing conditions, homelessness and transitional housing."